If Nigeria’s commercial banks wish to compete conveniently with the best global banking standards, they must begin to warm up for another round of recapitalization in a bid to shore up their capital base and strengthen their monetary policy. The indication of bank recapitalization in Nigeria became a convincing gesture as the Governor of CBN, Mr. Godwin Emefiele made known to the media his policy thrust as he commenced his second term in office. The CBN Governor was renominated for another term of five years and the Senate has successfully screened him, granting him the constitutional approval for a second term .
Earlier in April at the Spring meeting of the World Bank and International Monetary Fund in United States, a stringent call was made by Tobias Andria, Director of capital Markets Department of IMF to the effect that it has become much more necessary now that banks must seek higher capital courtesy of recapitalization if they are to avoid another round of recessional fall in the sector and that the regular cases of non performing loans should be tackkled frontally.
Godwin Emefiele revealed that under the newly proposed recapitalization regime, individual bank’s capital base will move higher beyond the 25 billion naira minimum platform used since 2004. Among Emefiele s plan is to ensure the economy grow at a double digits growth , single digits inflation with a projection that non oil exports would be increased to twelve billion dollars by 2023, while financial inclusion would raise to 95 percent by 2024 even as the managed float exchange rate would be retained.
CBN Governor noted that the 2004 recapitalization which increased bank’s capital from two billion naira to twenty five billion naira has lost financial relevance and his guideline is to ensure that Nigerian banks is listed among the top five hundred banks in the globe.
“In the next five years at most, the plan is to follow up on a capitalisation process of our banking industry in our committed bid to position our banks among the best 500 in the world ; banks will be required to maintain higher level of capital and liquid assets so as to reduce the impact of Economic crisis on our financial system,” Emefiele stressed. While Emefiele saluted Charles Soludo’s recapitalization agenda of 2004 for repositioning the bank sector and engendering consolidation , there is the need for our banks to take on large ticket transactions. ” What we are trying to say,” Emefiele maintained, is that ” recapitalization has weakened quite substantially and there is need for us to say it is time to recapitalise Nigerian banks again.
” It is a policy thrust which will be discussed at the committee of Governors’ meeting and the framework for the recapitalization of Nigerian banks will be unfolded for the whole world as soon as the guidelines are approved.”
In his reaction to the recapitalization prospects, President of the Association of Bureau de Change of Nigeria, Alhaji Gwadabe Aminu , said the agenda would remove toxic assets from their balance sheets because the toxic assets had made lending extremely difficult.
One strong positive of the new effort at bank recapitalization is that lenders will attract new foreign and local investors and there would be huge capital profile to entertain investment and infrastructural projects.